Musings and meanderings on the wonderful world of wireless from Matt Hatton, Director at Machina Research (www.machinaresearch.com) the world's leading advisors on M2M, IoT and mobile broadband strategy.

Friday, 27 May 2011

I'm currently working my way through our M2M forecasts for the our forthcoming report on the automotive sector and it seems to be one of the most uncertain sectors. Notwithstanding some of the established issues (such as the implications of the eCall directive and technology choices between 2G, 3G and 4G) there is one other that stands out as being particularly complicated and important: the role of the vehicle platform. By that I mean the on-board computer that provides an interface with some or all of the connectivity applications on the car. They're increasingly common on new cars and GM's OnStar has been successful in North America blending navigation, security, emergency and communications apps. Other manufacturers have established their own equivalents. GM has even sought to spread the virtues of OnStar to other car buyers through an aftermarket model launched in early 2011.

However, this is all rather reminiscent of the mobile phone world 10 years ago with proprietary OSes with relatively basic functionality gradually giving way to smartphones. And what an almighty ding-dong that's been. Vendors with strong OSes prospered (Nokia - until recently), while those with terrible OSes plummeted (bye bye Moto). I'm not going to be so presumptuous as to claim that the fortunes of motor manufacturers will rise and fall based on what their vehicle platform looks like. But, if anything, that exacerbates the issue. Car manufacturers needn't really worry too much if their vehicle platform is the most sophisticated. Their cars will probably sell anyway. There won't be a survival of the fittest where OSes rise and fall due to their relative superiority to the competition (I'm looking at you Symbian). A manufacturer can plough on with something fairly primitive. But that is a missed opportunity to give car buyers a really appealing connected experience in the car.

Some of the questions yet to be resolved are as follows:

Despite what I've written above, will users start to differentiate between cars based on platform experience and feature-set? It's an important part of the user experience and maybe it doesn't fit well with a premium car experience to have an on-board computer that acts like a Star-Tac (sorry, I'm having a bit of a go at Moto today seemingly!) rather than an iPhone.

Is it going to be a walled-garden or can we expect a plethora of third party application developers? Wouldn't you rather have access to your Skype account from the car rather than having yet another phone number? Will the vehicle manufacturers accept this?

Hand-in-hand with the above goes a question of whether most cars will have a single connection with multiple applications running on it or one connection per application? Would it make sense for a black-box style eCall module to be anything other than a stand-alone device? Will insurers want their own dedicated device for pay-as-you-drive? Strangely, although it's far from a perfect analogy, the thing that springs to mind here is Knight Rider. Clearly KITT had a very advanced voice-activated AI UI. So why did it (I hesitate to use the word "he") need a "Turbo Boost" button? I guess you just don't rely on the vehicle platform for some applications!

Does it make sense to draft in an established operating system rather than rely on a proprietary one? Windows? Apple iOS? Android? Will you get a choice or will different marques adopt different OSes?

Will people use the vehicle platform just as an interface and control everything from their mobile phones, circumventing the need for a sophisticated car platform at all, leaving said platform simply to simply carry out remote diagnostics and send manufacturer servicing alerts.

All of these questions are intertwined. If, for example, control of the car platform is managed through the handset with individual rather than vehicle specifications, this has implications for how car insurers might shape their products. Are you insuring the car or the driver?One thing seems certain and to misquote the old McCarthy* song: "We are all Knight Rider now".

This vehicle platform issue is just one of many that I'm addressing as part of the research for Machine-to-Machine (M2M) Communication in the Automotive Sector 2010-20 to be published in June. Drop me a line if you're interested to know more.

*It's called "We Are All Bourgeoise Now" and if you haven't heard it, you should.

Wednesday, 25 May 2011

If you're based in London, or indeed anywhere in Europe, and you're interested in M2M you really should get along to the M2M Forum Europe from the 6th to the 9th June. The speaker line up is excellent including Deutsche Telekom, Everything Everywhere, Ericsson, GSMA, KPN, Nissan, Orange and Telefonica O2. Plus a dedicated mHealth day on the 9th June.

Machina Research will be running a workshop on the first day (6th June) from 10am to 4pm, which will be very interesting. We'll be examining a number of key verticals to see what the dynamics are, presenting our M2M forecasts and assessment of market opportunity and examining some of the key challenges that need to be addressesed. We can even promise a special guest that will give a truly innovative insight into addressing the M2M opportunity. If you're a provider or consumer of M2M services or devices then you really need to attend this session.

Tuesday, 24 May 2011

Machina Research officially published it second Connected Intelligence report today, entitled Machine-to-Machine (M2M) Communication in Healthcare 2010-20. Lots of really interesting stuff in there including detailed M2M forecasts for adoption, traffic, technology and revenue across eight categories of healthcare application across 54 countries.

Here's a quote from my colleague Jim Morrish, the report's author: “The market for M2M healthcare applications will be huge, EUR69 billion in 2020. We expect that EUR3.1 billion of this revenue will go to mobile network operators for provision of data carriage services. A further EUR36 billion will be contested between systems integrators, device manufacturers, mobile operators and other service providers. At least EUR30 billion will almost certainly go to established manufacturers of medical equipment.”

The key findings of the report are as follows:

The installed base of M2M connected devices within the health sector will exceed 774 million by 2020. North America will be the largest region, with a share of worldwide connected medical devices peaking at 54% in 2014 and falling back to 42% by 2020, as growth in Europe accelerates

Short range connectivity technologies dominate throughout the forecast due to the typical topology of M2M healthcare solutions: the majority of solutions are characterized by multiple devices, connected to a central hub or aggregation device. Accordingly, we expect that the overwhelming majority of M2M connected healthcare devices will be connected only indirectly to wide area networks.

Consumer markets, particularly for the ‘worried well’ will be particularly attractive to mobile network operators, accounting for 76% of global M2M connections by 2020. The barriers to participation in consumer markets are also considerably lower than business markets, and available margins for solution providers can also be expected to be higher.

To take advantage of the opportunities in M2M connected healthcare, Mobile Network Operators should focus mainly on the consumer healthcare market, where brand assets, distribution channels and billing and customer service capabilities can be leveraged most effectively.

MNOs, Systems Integrators and the manufacturers of medical equipment should consider partnerships to bring to market products and services to support Clinical Remote Monitoring of patients in their homes, and certain Assisted Living solutions.

Potential manufacturers of connected medical devices for the consumer market should consider the benefits of partnering with fixed and mobile telecoms providers as channels to market, and also potentially to take advantage of the ability of such telecoms service providers to support the delivery of differentiated and higher-value service ‘wraps’.

The report examines the opportunities for MNOs, fixed line operators, device manufacturers, systems integrators and other service providers in addressing the rapidly growing market for embedded connectivity in the health sector, specifically home monitoring and personal monitoring for the worried well, telemedicine, first responder connectivity, connected medical environments, clinical remote monitoring, assisted living and clinical trials.

If you have a question about the report, you can contact Jim or me. We'll be happy to send you out an executive summary. More details of the report are also available on the website. The price of the report is EUR4,000 + VAT.

Thursday, 19 May 2011

Last week saw Google's I/O developers conference in San Francisco. As well as all the smartphone and tablet stuff the thing that really interested me was Android@Home, an initiative to allow control of connected home devices such as HVAC (heating, ventilation and air conditioning), lighting and security via the Android platform.

This is all great news for home automation Android@Home promises to be more user-friendly and, critically, developer-friendly. The Android Open Accessory Kit is open source, there are "no NDAs, no fees and no approvals process" as pointed out by Joe Britt. One of the issues holding back the connected home has been a lack of standardisation. Lots of different devices using different standards and not interoperable with your central management systems or indeed with each other. A colleague of mine has a horror story about a friend who spent GBP4,000 networking all the lighting in his house only to find that the switches were not compatible with the lights.

Indeed one of the first manifestations of this Android-powered home devices was a lightbulb from Lighting Science Group. Link here. It's damn ugly and at USD40 it not the cheapest but scale should bring down prices significantly.

The approach taken by Google initially appears to differ from the prevailing tide of home automation because it concerns itself first and foremost with the end points. Make those compatible with Android and everything else is irrelevant. No proprietary central device management. Just the smartphone, compatible with any end device. But, it seems that one can't get away from the idea of a central hub and a semi-proprietary technology.

Google is looking at introducing a wireless mesh networking technology to connect all of the devices. They're a little cautious to reveal too much but it's low cost, low power, not WiFi, not Zigbee and it operates in the 900 band (which is bad for Europe where 900's dominated by GSM and eventually will be refarmed to W-CDMA). There can be up to 500 devices connected, up to 50m apart (I'm not sure about everyone else but that SHOULD be enough for my apartment) and connects via an Android@Home base station. That's all they're saying. Given that many of the applications will be very light in terms of traffic, a few KB a day/week/month, perhaps WiFi isn't the perfect option.

While Google and Android are big proponents of open source systems, should we assume that this new wireless tech will only be usable by Android@Home devices? That's the big question for me.

Machina Research will be publishing a report in June 2011 entitled Machine-to-Machine (M2M) Communication in the Intelligent Building 2010-2020examining the connected home. Furthermore we will also be releasing a report on M2M in the Consumer Electronics sector around the same time. Both are critically affected by announcements such as this. Visit the Machina Research website or email me for more details.

Wednesday, 18 May 2011

UK Environment Secretary Chris Huhne has been grabbing the headlines for all the wrong reasons in the last couple of weeks. The controversy over affairs and allegations about avoiding a driving conviction have overshadowed some major news. Yesterday he committed the UK government to being the greenest ever and possibly the greenest in the world by reducing carbon emissions to 50% of their 1990 level by 2027. Full story here.

The implications are substantial for M2M as the commitment implies a complete overhaul of electricity generation, much wider adoption of electric vehicles and substantial improvements in home energy efficiency. All of this promises more transport & distribution monitoring equipment, connected cars, connected EV charging points and smart meters (OK, so the UK was already committed to rolling out smart meters in the next 5-10 years, so that's already expected).

Hooray for Sprint. They're the first MNO to put out anything approaching usable figures for M2M ARPU*. Speaking at the Ericsson Business Innovation Froum, Geoff Martin, Manager of Platforms and head of Sprint's new M2M Collaboration Centre spilled the beans on how much revenue some M2M applications generated.

Overall ARPU from M2M was USD5-10 per month. The outliers are digital signage, generating USD150/month, while smart grids accounted for a more modest USD1/month. To be honest, they'll be very lucky indeed to maintain a USD1/month ARPU on smart meters over the long term. More competition, OTA provisioning and increasing awareness by utilities will drive that down. In terms of traffic it's at most a few MB per month. Not worth USD1. More on this issue in our recent report Machine-to-Machine (M2M) Communication in the Utilities Sector 2010-20.

Critically M2M is flagged up by Martin as being very profitable with no handset subsidies and no customer care. The latter point is somewhat debatable. There is no direct customer care for the end-point itself. However, the enterprise customer, which control the lion's share of the M2M market, will be demanding. These are business critical systems in many cases and MNOs will have to make commitments regarding QoS.

One of the biggest issues for Sprint going forwards is what technology choices they make. Currently running CDMA, WiMAX and iDEN (courtesy of the Nextel acquisition a few years back) and with some strong hints that they'll switch to LTE, there is some technological uncertainty for Sprint's customers. For a lot of applications, most notably smart grid, the devices have a long life expectancy. Chopping and changing technology causes a high degree of consternation for potential customers.

Martin also revealed some figures relating to module cost. Referring specifically to the "Qualcomm tax" he commented that CDMA modules are 15-20% more expensive than GSM. He also noted that WiMAX modules were half of the price of CDMA. However, he also noted that M2M applications were very light in terms of bandwidth. Obviously we know this already but it is perhaps a hint that low bandwidth mature techs (in Sprint's case CDMA) should be retained. LTE modules cost USD60-USD70 but the price needs to come down to be attractive.

Machina Research has recently published a report on M2M in the utilities market (including smart meters and smart grid) with comprehensive forecasts for 54 countries of connections, revenue and technology. Click here or email me here for more details.

*Obviously "ARPU" isn't really the right term here as there isn't really a user, but we'll stick with the term for now until something more appropriate comes along.

Tuesday, 17 May 2011

T-Mobile has decided to outsource its M2M operations to a third party, Raco. The latter will take control of all provisioning and management and take over T-Mobile's in-house M2M staff. Article here.

At first glance this seems crazy. M2M promises to generate almost no revenue from traffic for large numbers of applications including smart meters (see our report here) and vehicle tracking. Let's not get blinded by what's going on with eReaders, tablets and a few other bandwidth heavy devices. Most M2M apps are low bandwidth and low traffic. Hauling bits around won't generate much revenue. Where an MNO can generate revenue is from provisioning and management. Being a bit-pipe was OK-ish for mobile data services but for most M2M applications it's just not viable as a stand-alone if MNOs are serious about M2M.

So why have they done it. Two possibilities spring to mind.

Maybe this all tied up with the putative AT&T acquisition. The latter is probably stronger in M2M, although this is kinda debatable given what they consider to be M2M, see my earlier blogpost here. Maybe the idea is that they can shift all the direct clients onto a third party platform which should be easier to migrate to a merged AT&T. Is that the logic here?

More likely they've decided that it'll be too difficult in the crowded market place to guarantee that they'll get enough revenue over and above traffic. So, rather than try to fight a losing battle for what is effectively value added service revenue they'd rather just accept that they're going to make only a tiny amount of revenue from wholesale data and move on to doing something more profitable. This is in stark contrast to the prevailing mentality which is to set up specialist M2M business units and competence centres.

Of course the AT&T acquisition confuses the issue somewhat given that a huge chunk of their competition is soon to become part of the same company and they can't make big decisions like this without one eye on their new partner. However, imagining for a moment that that wasn't occuring maybe T-Mobile's decision is genius. Or at least supremely realistic. Take a punt on M2M being only a marginal opportunity for MNOs and all your competitors getting bogged down.

Monday, 16 May 2011

We've joined up with the folks over at Mobile Europe to produce their Insight Report on M2M and embedded technology for the June/July issue. As part of that work we're running a survey asking the wise people of the telecoms industry how they see the opportunity for M2M. If you'd like to take the survey (and we know you want your voice heard!) then please follow the link here.

If you'd like to know more about the Insight Report, then you can find more info here.

It's exciting times for Machina Research as we published our report on the M2M market in the utilities sector last week. Utilities have been using M2M-style monitoring equipment for decades so the market is not a new one. However we expect the segment to see very rapid growth over the next 10 years driven by government intervention in the form of legal requirements for smart meter deployment, stimulus packages for smart grid roll-outs and wider installation of electric vehicle charging points.

The number of M2M connections in the utilities industry will grow from 100 million in 2010 to 1.5 billion in 2020, of which 99% will be smart meters.

Cellular connections will ultimately dominate, growing from 38% to 57% of installed base by 2020. Metropolitan Area Networks (MANs), including powerline communications (PLC) and community WiFi connections, will also be significant, accounting for 28% of connections in 2020, albeit down from 53% in 2010. Of the wireless wide area connections, 3G is will dominate.

The total market for M2M in the utilities segment will be worth EUR24 billion in 2020, up from EUR4 billion in 2010 and having peaked at EUR28 billion in 2017. From 2017 onwards the number of new additions starts to decline, resulting in a reduction in device, installation and provisioning revenue. The largest region in revenue terms is Emerging Asia-Pacific, courtesy of China’s significant investments in utilities upgrades. By 2020 China will account for 40% of global M2M utilities connections and 31% of revenue.

Pure traffic revenue, that is the revenue associated with carrying bits, is tiny. Excluding device, installation, provisioning and other associated services, mobile traffic revenue will amount to only EUR50 million worldwide in 2010, growing to EUR1.2 billion by 2020. Proportionately that is 1% of total revenue growing to 5%. The revenue opportunity for M2M in the utilities sector does not lie in carrying traffic. Mobile network operators must be involved in other associated elements of the service provision if they are to secure a significant portion of the EUR190 billion that will be generated between 2011 and 2020 in the sector.

About the report

Machine-to-machine (M2M) Communication in the Utilities Sector 2010-20 provides invaluable qualitative and quantitative analysis of the emerging opportunity for machine-to-machine communications in the utilities sector.

The report reviews the major drivers and barriers for growth of M2M in the utilities sector and analyses the key market dynamics, including how MNOs, fixed operators, service providers and vendors might go about identifying and realising addressable opportunities. Each application is examined individually with case studies and forecast analysis.

The forecast excel data sheet includes very granular 10 year market forecasts for 54 countries and 6 regions. The forecast covers numbers of connections, traffic and revenue for each of the three applications (electric vehicle charging, smart metering and transport & distribution management) with splits by technology (2G, 3G, 4G, short range, MAN, fixed WAN and satellite) and a break-out of mobile traffic revenue.

To get hold of a copy of the executive summary, table of contents and a blank sample data sheet, email me.

The price of the report is EUR4,000 + VAT. To order your copy, find out more about the report or to discuss annual subscriptions please contact our sales team.